If you’re planning to apply for a reverse mortgage, your home’s value is probably the most important variable used to determine how much money you can get out of your home.
An official appraisal conducted by a licensed appraiser tells your prospective lender how much your home is worth, which helps them calculate how much your payout will be.
Here’s how the home appraisal process works:
Lenders have a list of appraisers they tend to work with, says Joe DeMarkey, a regional director and reverse mortgage specialist at reverse mortgage lender MetLife (Stock Quote: MET). Accountants, attorneys and others can also make recommendations.
Depending on the size, value and location of your home, the actual appraisal process can take between a couple of days and a couple of weeks.
As the borrower, you're responsible for paying the appraiser. Most appraisals cost between $350 and $500, and you may have the option to pay for it up front or have it taken out of your reverse mortgage payout.
The official appraisal covers several things:
- Interior: An appraiser will take note of the size and style your home, the materials used in your cabinets, countertops and flooring, and any upgrades you might have made, according to Alan Tuchfeld, a certified residential appraiser at Integrity Appraisal Services in Littleton, Colo. For instance, carpet is standard. Hardwood is an upgrade. Oak kitchen cabinets are standard, and better wood like maple or cherry is an upgrade. Formica countertops are considered standard, but ceramic, granite, slate and marble are a plus.
- Structure: Your appraiser will also take into account your home’s air conditioning and heating, the electrical system, whether your basement is finished, the condition of your roof and attic, the size of your garage, your foundation, yard, and your proximity to water and sewer lines.
- Condition: Your appraiser will look at the condition of your home, see if you’ve remodeled and take measurements and pictures, says Bonnie Nach, an appraiser at Sullivan Appraisal Services in Oakland, N.J.
- Neighborhood: Information on your neighborhood, including your town’s unemployment rate, gentrification and nearby residential and commercial properties also go esinto an appraisal, says Mark Marden of Marden Appraisal Services in Washington, D.C.
- Safety: Reverse mortgage paperwork going to the Department of Housing and Urban Development may require more detailed information, including whether your home complies with certain HUD safety requirements, such as the presence of handrails by stairs. Some appraisers may charge more for this.
If your home does not comply with safety requirements, your appraisal amount may only be valid if you make certain repairs before you get a reverse mortgage.
“At the bottom of the appraisal report, we’ll say the value is either as-is, or it’s subject to repairs and list all the repairs that need to be done for appraisal to be valid,” says Nach.